MONETARY CONDITIONS INDEX: NEW EMPIRICAL EVIDENCE FROM CENTRAL AND EASTERN EUROPEAN COUNTRIES

• Authors: Nucu Anca Elena , Anton Sorin Gabriel
• Languages of publication: EN

Abstracts

EN

The aim of the paper is to build a Monetary Conditions Index (MCI) for four Central and Eastern European (CEE) countries by combining changes in the short-term interest rate and in the real effective exchange rate over the period August 2005 – December 2015. Contrary to previous papers, we employ a Vector Error Correction Model to assess the relative importance of real interest rate and real exchange rate for the monetary conditions in several CEE countries. The results of the analysis provide new empirical evidence on the MCI’s ability to capture the monetary policy developments. Furthermore, we employ Granger causality to infer the extent of external influences on the overall monetary conditions of analysed countries. The results highlight that monetary decisions in the Eurozone have a prominent influence on monetary conditions in CEE countries.

Keywords

EN

MONETARY CONDITIONS INDEX; CENTRAL AND EASTERN EUROPE; MONETARY POLICY; VECTOR ERROR CORRECTION MODEL; INTEREST RATE; EXCHANGE RATE

• Publisher: Institute of Slovak and World Economics and Institute for Forecasting, Slovak Academy of Sciences
• Journal: Ekonomický časopis (Journal of Economics)
• Year: 2018
• Volume: 66
• Issue: 2
• Pages: 139 – 158

Contributors

author

Nucu Anca Elena

• Alexandru Ioan Cuza University of Iasi, Faculty of Economics and Business Administration, Carol I Avenue, No. 11, 700505 Iasi, Romania

author

Anton Sorin Gabriel